The portable fortune that you can take to dinner; Diamonds might not

Diamonds are not only for ever, they are light, portable and tradeable anywhere round the world, which is why they are considered a safe haven in times of international uncertainty.

As an investment, they are probably the last place you should look to make a quick killing. Diamond prices have been depressed for decades, and the industry often struggles to keep pace with the aggressive growth in other sectors.

Yet buying diamonds haunts our psyches as the ultimate investment statement. You can still touch them, and enjoy their magical sparkle, long after your dotcom shares have gone up in smoke.

Serious buyers may wish to shop for their stones uncut on one of the rough diamond markets in Antwerp, Tel Aviv, Bombay and New York. But you need to have serious money, and be looking for a seriously large stone to have any hope of it achieving investment status.

Forget anything below one carat, and a flawless one carat diamond might cost between (pounds) 5000 and (pounds) 10,000. But as Glasgow diamond designer Eric Smith points out: "A one-carat stone you might pay (pounds) 10,000 for today, you could have picked up for (pounds) 200 in 1970."

As with any aesthetic commodity, the individuality of a particular stone, and potential appeal to other buyers, will affect the price. But as Fiona Spence at diamond miners De Beers suggests: "You get what you pay for. The bigger and better the quality of the stone, the greater its desirability and eventual resale price."

When it comes to picking a diamond the key considerations are therefore size, colour clarity and cut. Small diamonds that feature in much high street jewellery have no real investment value. The Cullinan, facets of which were incorporated in the crown jewels, was the largest diamond ever discovered, weighing 3106 carats. Millennium Star, a beautiful pear-shaped monster, more recently weighed in at 203 carats.

The purest white colour is the most valued and jewellers use letters from D to X to classify them, with D the most highly precious. On the high street the most common colours would range from G to H and I, which look pure to the naked eye, but are less so to the expert.

Clarity is also crucial. Some stones have slight carbon deposits that spoil them and lower values.

Spence advises: "The best diamonds allow the light to go in and out all through the stone. Spin it round and the more it sparkles the better it is because it is picking up all the available light."

The cut, too, can make a difference. There is the brilliant cut for big round stones, or the oval cuts. Triangular cuts are known as trilliants and rectangular ones baguettes. The emerald cut is for square stones rubbing off corners. Finally, the Princess cut is for square bright sparkly stones.

Diamonds were first discovered in India more than 2800 years ago. The ancient Greeks, who gave us the word diamond from their "adamas" - meaning unconquerable - thought they were tears of the gods.

Equally romantically, the ancient Romans believed diamonds were splinters of stars fallen to earth.

The reality is equally awesome. Composed of common carbon, like graphite in a lead pencil, they were formed billions of years ago by extreme heat and pressure deep below the surface of the earth. The conditions, in places usually some 150km or greater below ground, no longer exist as the planet has cooled. The resulting diamonds are the hardest and most enduring substance on earth.

For many centuries, India remained the prime source. At that time only the richest rulers could hope to own one. Only relatively recently in the 19th century were new mines opened up in Brazil and South Africa.

Australia is also a diamond provider today, but its stones, often marketed as champagne or cognac, are usually brown, and therefore much less precious.

Most Scottish diamond buyers will buy a stone only once in their lives, when they get married. For them the design of the stone is as important as the quality.

The solitaire remains the most popular, but Smith, who sells rings from (pounds) 1000 pounds to (pounds) 80,000 pounds says individual design is becoming increasingly important.

He explains: "Younger buyers are interested in the design element and are very discerning."

Shop bought diamond rings rarely offer much by way of resale value. Spence says: "It's like buying a new car. The minute you take it off the forecourt its value drops. Then you are left with a second- hand ring."

However, Smith argues that the better and more expensive the ring, the healthier its investment potential.

He says: "There are no shortage of buyers at the (pounds) 80,000 end of the market. Some people are mature buyers who have wanted to own a big diamond all their lives. It has been a dream.

"At the younger end, we have people who have successfully set up businesses and sold them on, and see a piece of diamond jewellery as a straightforward investment asset."

But it is in times of trouble that diamonds come into their own on the investment front, primarily because they allow you to put all your wealth in your pocket and run.

"You could have a couple of diamonds worth millions of pounds in your pockets, and no one would know you were walking around with a fortune," Spence concludes.

Copyright 2003 SMG Sunday Newspapers Ltd.
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